The Cable

Obama Takes Down Potential $152 Billion International Pharmaceutical Giant

A potential drug super-company has been scuttled by President Obama.

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Both Democratic presidential candidates Hillary Clinton and Bernie Sanders see eye-to-eye with Republican front-runner Donald Trump on one issue: They all oppose tax inversion, or when a U.S. company acquires a foreign rival and reincorporates overseas. On Wednesday, the candidates all got news they can celebrate.

In a statement, U.S.-based drugmaker Pfizer Inc. announced it is walking away from a merger with Allergan, a pharmaceutical company based in Ireland. The merger, which was proposed last year, would have created a drug super-corporation: It was valued at $152 billion and would have represented the largest transaction of its kind in history.

“Pfizer approached this transaction from a position of strength and viewed the potential combination as an accelerator of existing strategies,” Ian Read, chairman and CEO of Pfizer, said in a statement Wednesday. “We remain focused on continuing to enhance the value of our innovative and established businesses.”

The canceled transaction is a major victory for President Barack Obama. This week, the Treasury Department proposed temporary new rules meant to discourage corporate inversions; Treasury Secretary Jack Lew called on Congress to make them permanent. The rules make it harder for companies to move their tax addresses out of the United States, and then move profits to low-tax countries. This process is known as earnings stripping.

The timing of the canceled merger seems hardly a coincidence, coming just days after the so-called loophole was closed. The White House denied the new regulations were meant to stop the merger from proceeding, with Obama press secretary Josh Earnest saying Tuesday the president “is not focused on a specific transaction, it’s focused on specific loopholes.” However, Obama, who made a rare appearance at Tuesday’s White House press briefing, said deals like the Pfizer one “sticks the rest of us with the tab, and it makes hardworking Americans feel like the deck is stacked against them.”

Democrats Clinton and Sanders both praised the end of the merger Wednesday.

Trump has yet to publicly respond to the cancellation, but he has condemned the merger in the past. “The fact that Pfizer is leaving our country with a tremendous loss of jobs is disgusting,” the businessman said last November.

Photo credit: SAUL LOEB/Getty Images

David Francis was a senior reporter for Foreign Policy, where he covered international finance. @davidcfrancis

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